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Kaleido Bio and Cirius Join an IPO Queue Stalled by Federal Shutdown

The partial government shutdown may have diminished staffing at the SEC, but it hasn’t dimmed the hopes of biotech firms hoping to go public. On Friday, Kaleido Biosciences and Cirius Therapeutics both filed paperwork for their respective initial public offerings with the securities regulator.

While it’s operating with “very limited staff” due to the shutdown, the SEC’s electronic system for regulatory filings is still up and running. Kaleido and Cirius join a handful of biotechs that have filed for IPOs since the shutdown started last month.

Kaleido, a microbiome drugs developer, set a preliminary $100 million target for its IPO. The company has applied for a Nasdaq listing under the stock symbol “KLDO.”

The startup aims to treat disease with compounds that alter the microbiome’s metabolism. Kaleido says it has a library of more than 1,000 of these microbiome metabolic therapy candidates. Its lead candidate, KB195, has completed a Phase 1 study testing it in hyperammonemia, a metabolic condition characterized by high levels of ammonia in the blood. Kaleido says this drug could potentially treat two types of hyperammonemia: urea cycle disorder (UCD) and hepatic encephalopathy (HE). UCD is an inherited disorder that affects enzymes used by the body to process urea. In HE, liver damage impairs the organ’s ability to remove toxins from the blood.

In its prospectus, Kaleido says it will use the IPO proceeds to advance KB195 into a Phase 2 study in hyperammonemia patients with UCD in the first half of this year. The company is also evaluating that drug and another one, KB174, for HE. The company will determine which of the two to advance to Phase 2 in HE after it reviews data from the UCD study. A Phase 2 study in HE could start in the first quarter of 2020, according to the Kaleido filing.

Meanwhile, Cirius set a preliminary target to raise $86 million from its IPO. The San Diego biotech has applied to list its shares on the Nasdaq under the stock symbol “CSTX.”

The lead Cirius drug candidate, MSDC-0602K, is a small molecule drug developed as a treatment for nonalcoholic steatohepatitis (NASH), a disease that can cause liver damage called fibrosis. In its prospectus, Cirius says its drug is a second generation thiazolidinedione (TZD), a class of drugs used to treat type 2 diabetes. The company says its once daily pill drug targets mitochondrial pyruvate carrier, a protein that mediates overnutrition in cells, which studies have found is a cause of NASH and metabolic disorders.

Cirius is currently testing its drug in a Phase 2b study enrolling 402 patients diagnosed with NASH and fibrosis. In October, Cirius released interim data from the study showing improvement in liver function and and blood sugar levels after six months of treatment. Side effects included joint and back pain, as well as weight gain, which the company noted is consistent with other therapies that improve insulin resistance. The rate of peripheral edema, swelling in the limbs that is a side effect associated with thiazolidinediones, was comparable to a placebo. Cirius expects to report final data for the study in the second half of this year.

Cirius says it will use its IPO proceeds to continue clinical testing of its lead drug. The IPO cash will also pay for manufacturing of the compound.

Even though Kaleido and Cirius were able to file IPO paperwork, don’t expect those companies or the dozens of others that filed to complete a sale of stock to the public any time soon. The SEC must review and approve a company’s plans to sell securities. Those tasks are among the functions the SEC says have been discontinued during the shutdown. With the limited staffing, the SEC says personnel are available to respond only to “emergency situations involving market integrity and investor protection, including law enforcement.”